Gold prices on COMEX resumed its losing streak after spending most of the day in positive territory.
The yellow metal had reversed all of its gains on Friday as the dollar strengthened on reports that the US will deploy more troops in the Middle East.
Meanwhile, oil prices reversed early losses to trade higher on the possibility of the US moving more troops to the Middle East, which could lead to an escalation in tensions in the region.
Copper and aluminium prices on the London Metal Exchange fell as sentiment in the market worsened with investors exercising caution.
At the time of writing, the three-month aluminium contract on LME was at $3,193 per ton, down 1.5%, while the copper contract was 2.2% lower at $11,919.88 a ton.
Gold reverses gains
Gold prices on COMEX fell again to trade near levels not seen since early February.
Analysts, however, believe that the recent volatility in gold is an opportunity for investors to purchase the yellow metal.
Thousands of additional US Marines and Sailors are being deployed to the Middle East, according to a Reuters report.
This news caused the US dollar and US Treasury yields to strengthen.
A stronger dollar typically makes gold, which is priced in the greenback, less appealing to investors holding other currencies.
The joint attack launched by the US and Israel on February 28 has escalated into a war against Iran, resulting in thousands of casualties, regional instability across the Middle East, and a negative impact on the global economy.
Furthermore, Iran’s sustained blockade of the Strait of Hormuz is expected to keep energy prices high and contribute to inflation.
Gold price has fallen by 17% from the high reached shortly after the start of the war in the Middle East.
“Recently, there has been an inverse correlation between oil prices and the price of gold. This is because rising oil prices make interest rate cuts by the US Federal Reserve less likely, as Fed Chair Powell’s comments following Wednesday’s FOMC meeting also indicated,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report.
Since the war in Iran began, investors have been withdrawing a significant amount of funds from gold ETFs.
The COMEX gold contract was last at $4,564.24 per ounce, down 0.9%, while silver was at $69.605 an ounce, down 2.1%.
“If central banks hesitate to aggressively fight the rising cost of living, dismissing it once again as a transitory byproduct of the oil shock, gold will likely reignite its rally sooner rather than later,” said John Murillo, chief business officer of B2BROKER, a global fintech solutions provider for financial institutions.
“For now, the shiny yellow metal is a “buy-on-dip” play, waiting for the market to realize that with US national debt touching a $39 trillion milestone, fiat credibility is eroding faster than interest rates can absorb it.”
Oil climbs
Oil prices reversed their losses on Friday to trade in the green at the prospect of intensifying tensions in the Middle East.
Reports claimed that the US is likely to deploy more troops in the Middle East, raising concerns about further supply disruptions.
Thousands of US Marines and Sailors are being deployed as reinforcements to the Middle East, according to a Reuters report.
The price of West Texas Intermediate crude oil was at $96.53 per barrel, up 1.2%, while Brent was at $109.27 per barrel, up 0.6% from the previous close.
Prices had dropped by over 1% earlier on Friday, following announcements from the US regarding steps to address the oil supply crisis.
This development occurred as major European countries, Japan, and Canada committed to joining efforts aimed at ensuring secure maritime passage through the Strait of Hormuz.
US Energy Secretary Chris Wright announced on Friday that the removal of oil sanctions on Iranian cargoes currently stranded at sea would allow supplies to reach Asia within three to four days.
Wright emphasised the need for more oil in Asia, noting that the US is contributing to a coordinated release from strategic reserves, which will take place over the next several months.
Meanwhile, further escalation occurred in the Middle East on Wednesday following a key exchange of attacks.
Israel struck Iran’s largest gas processing facility, located in the South Pars gas field—a region shared with Qatar and the world’s largest gas field.
In retaliation, Iran targeted and reportedly inflicted serious damage upon the world’s largest LNG liquefaction plant in Qatar.
The Dallas Fed’s upcoming quarterly energy survey, covering the major US oil producer Texas, is expected to be significantly more optimistic than the pessimistic December survey.
This shift is anticipated due to the WTI oil price now being substantially higher than when the last survey was conducted.
“It will be particularly interesting to see whether shale oil companies intend to increase their investment in drilling new wells, which would suggest rising US oil production,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report.
“In the short term, however, this would not provide any relief for the market, as it would take several months for production to actually increase.”
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